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The Costs and Consequences of Frontline Non-Compliance

Pedro Da Costa Coutinho
Pedro Da Costa Coutinho

From security protocols to risk management procedures, when was the last time your organization conducted an audit? If you’re not sure of the answer, then you might want to read ahead. 

Compliance can be a thorny issue for businesses across industries. But how does compliance for the frontline compliance differ? Frontline compliance presents an even bigger challenge - when your workforce is physically dispersed and hard to reach.

From a training perspective, this makes metrics including learner completion rates and training deployment important as 24%of organizations don't have a compliance training program in place but, for those that do, 90% are unable to apply their learning to their daily operations. A decentralized workforce also means that organizations must comply with relevant local, state, federal, and even international laws and regulations if they’re operating beyond national borders, highlighting the compliance complexity in the deskless context.

Read on to discover what non-compliance is, what it means for frontline employees, and what the heavy price of non-compliance is for organizations that neglect this.

What is non-compliance?

Compliance relates to the organizational commitment to the rules and regulations that govern a business. In other words, the legal parameters within which a company must conduct its business.

In contrast, non-compliance refers to the failure to comply with something (e.g. a rule or a policy). In a business context, non-compliance means an inability to comply with specific rules and regulations within the industry or region of operation. 

For example, frontline workers using their devices for job-related tasks need to achieve data safety compliance on their platform through two-factor authentication measures in order to protect business-critical information. Refusing to do so, or not adhering to these rules, might jeopardize the business or compromise the worker’s employment. 

What are some of the consequences of non-compliance?

So, when compliance efforts aren't up to scratch, what is at risk for a business? 

1. Accidents and injuries

Preventative workplace hazards, like accidents and injuries, fall under an organization’s duty of care to a worker - they are responsible for equipping their people with safety and compliance information.

The most serious implication of substandard compliance efforts is loss of life. And if life isn’t hanging in the balance, quality of life could be. Accidents and injuries can have a host of detrimental effects on the employee - wagelessness, temporary or permanent inability to return to work (e.g. physical injury), psychological damage (e.g. post-traumatic stress disorder), and a negative strain on interpersonal relationships. 

The risk of injury can extend to the general public too, depending on where the accident has taken place. With an employee operating in a public domain, e.g. a sidewalk, the risk is extended to passersby.

In business terms, an injured employee means productivity loss - for a period of time, an employee loses their ability to be a contributing member of the workforce.  And productivity loss has an associated financial cost - in 2020, worker injury coststotaled $164 billion with 99 million days lost as a result, a 53% increase from previous years. 

2. Financial damage

The direct cost of non-compliance is almost too great to ignore, with annual average compliance costs stacking up to $14.82 million

The cost of lost productivity is an indirect one, however, there are numerous direct costs which can be severely detrimental to an organization’s financial posture and limit its competitive ability. These can include fines and penalties (e.g. from relevant regulatory bodies), legal action, and can, in the worst-case scenario, lead to bankruptcy altogether.

A prime example of this is the Capital One class action lawsuit, where a 2019 user data breach cost the company $190 million - $240 million, plus a $50 million regulatory penalty. And even if organizations weather these upfront financial costs, there can be more insidious, longer-term effects of non-compliance, that give rise to future costs like employee loss and a damaged brand reputation.

3. Reputational damage

Reputational consequences can cause just as much damage as financial ones. Mistrust can wreak havoc on your business, and lead to the loss of customers, employees, or relevant stakeholders, like investors.

A bad reputation that arises from non-compliance can be seen as a long-term cost that’s not easy to allay - it outlives financial costs as it takes time to recover from, and to rebuild consumer and market confidence.  Stakeholders and employees alike may fear being associated with a specific company with a tarnished reputation.

From a recruitment perspective, a bad corporate reputation can weaken an employer's value proposition, which makes hiring a challenge - if candidates aren’t excited about the prospect of becoming a part of your workforce because of how you’re perceived, your talent pool will be limited. A negative employer reputation translates to additional costs of $4,723 per employee hired. Fewer candidate options can lead to a lower candidate quality as employers are revoked the privilege of being picky with who they bring on board.

 Similarly, acquiring new business and clients may pose challenging due to an unsavory reputation. Even existing stakeholders may withdraw investments because of bad press that can, in some cases, lead to lowered stock prices and a market-wide loss of investor confidence.

4. High employee turnover

Besides making hiring a challenge, substandard compliance efforts can make retaining the employees you do have near impossible - 73% of respondents regarded workplace safety as extremely important in their job with 9 out of 10 noting their employers have a duty to look after their workplace safety and wellbeing.

Even if organizations retain their people, non-compliance breeds an unengaged workforce - 59% of employees witnessing non-compliant workplace practices are more likely to actively begin searching for a job. 

This is no surprise as employees won’t feel cared for when their health and safety isn’t taken into consideration nor prioritized. Current employees may also grow disengaged and fail to see a future at the company with an uncertain financial outlook as a cost of non-compliance. This makes it a divestment for companies from a hiring perspective as the cost of a new hire - from pre-boarding to training - can be as high as 33% of the wages of a seasoned worker.

The good thing is employee turnover as a result of non-compliance is preventable. Among 6,000 truck drivers surveyed, organizations that prioritized workplace safety were linked to higher levels of job satisfaction and engagement and were more likely to remain with their employer.

How to avoid non-compliance in the workplace

When you factor in productivity and revenue loss, business disruption, penalties, and other fines, an investment in compliance is a far more favorable cost to front than the associated costs you might face from a failure to comply.

Ensuring a safe work environment pays dividends by increasing employee engagement, reducing the risk of incidents, and in turn - raising loyalty, productivity, and motivation.  And, given that non-compliance can be triple the cost of compliance, is a sound investment to make. 

One way in which to do this is to provide your deskless workforce with embeddable mobile training to inform them of the latest compliance requirements to mitigate compliance risks and any reputational and financial consequences.

eduMe is a mobile-based training tool that allows companies to roll out tailored and robust safety and compliance education seamlessly and effectively to their workforce. By surfacing important safety & compliance information in an engaging and easy-to-access way, eduMe reduced injuries for one North American Logistics Company by 26%.

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